What are the biggest tax misconceptions and misunderstandings people have?

Thanks for this list! I'm curious about the quarterly payments for self-employed people. I just started freelancing this year and had no idea this was a thing. How do you even calculate how much to pay each quarter when your income is irregular?

For self-employed people with irregular income, you have a few options. You can pay based on your previous year's tax liability (safe harbor rule - usually 100% or 110% depending on income). Or you can estimate each quarter based on actual earnings using Form 1040-ES. Most freelancers I work with set aside 25-30% of each payment they receive, then calculate actual quarterly amounts using accounting software or with professional help. The key is consistency - the IRS likes to see you making regular payments even if the amounts vary based on your income fluctuations.

Does it actually look at your specific tax docs? I've tried other "AI tax help" things and they just give generic advice that I could find on Google. Also, how does it handle state-specific tax questions?

I'm a bit skeptical about AI for taxes. How does it compare to just going to a human tax professional? My situation is fairly complex with rental properties and some stock options, and I'm worried AI might miss nuances a human would catch.

Yes, it actually analyzes your specific documents - you upload them securely and it goes through line by line identifying issues. I uploaded my 1099s and some expense receipts, and it caught specifics like my internet expenses being only partially deductible based on my actual usage patterns. For complex situations like rental properties and stock options, it's probably even more valuable. My brother has two rental properties and said it caught depreciation recapture issues his previous accountant missed. It's created by tax professionals who trained the AI on thousands of real tax situations, so it handles nuances really well while being more affordable than most CPAs.

Wait, I don't understand - how does this actually work? Does it just dial for you or something? I've been trying to reach the IRS about a missing refund for weeks and keep getting disconnected.

Sorry, but this sounds too good to be true. The IRS phone lines are notoriously impenetrable. You're claiming some service magically gets you through when millions of people can't get through? I'm extremely suspicious this is just another scam.

It doesn't just dial for you - it uses automated technology to navigate the IRS phone system and wait in the queue for you. When an actual agent picks up, you get a call connecting you directly to them. It saved me literally days of waiting on hold. It's definitely not a scam - it's been featured in major news outlets and has thousands of verified reviews. I was skeptical too, but when you're desperate to reach the IRS after weeks of trying, you'll try anything. The service just handles the wait time for you instead of you having to sit by your phone for hours.

Wait, so what ARE the rules? If I take a client to dinner and we discuss business the whole time, is that not fully deductible? And what about if I buy coffee while working at a cafe?

For business meals, currently (for 2025 filing) we're back to the standard rule that business meals are generally 50% deductible if business is discussed and you keep proper documentation. The temporary 100% deduction for restaurant meals was just for 2021-2022 as a COVID relief measure. Coffee while working at a cafe generally isn't deductible as a business expense unless you're meeting with a client or having a business discussion. Just working while having coffee doesn't make it a business expense - there's a distinction between personal expenses that happen while working and actual business expenses. The IRS looks for a clear business purpose beyond just fueling yourself while working.

This is a great point! I've always found the "don't give the government an interest-free loan" advice to be overblown. With today's savings account rates, the interest you'd earn on that money throughout the year is minimal compared to the stress of potentially owing at tax time. For most W-2 workers, a small refund is actually good peace of mind.

Exactly! I calculated it out and even with a $2,400 refund (which is what I typically get), at 4% interest I'm only "losing" about $50-60 over the course of a year. That's well worth the peace of mind of not having to worry about owing money. Plus, I've gotten much better at immediately putting my refund into my Roth IRA each year so it starts working for me right away rather than getting spent.

Is there an income threshold where this starts to happen? My partner and I both make around $85k and are thinking about getting married next year. Would we be affected by this?